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Coal Exports: New U.S. Record

Written by: Kapitall02/11/13 - 1:32 PM EST

Tickers in this article:
ACI ANR BTU CNX KOL PKOL

It isn&rsquo;t news that natural gas has dethroned coal as the key source of power in the U.S. Many investors have become skittish about the future of the coal industry, especially with environmental regulation going forward. However, before you turn your back on the black rock it&rsquo;s worth considering its future abroad.

Although natural gas has been cheap in the United States, it can be almost five times as expensive abroad. Last year the U.S. broke its coal export record reaching 120 millions tons, doubling its 2009 exports. However, the rapid increases in coal exports are being supported by Europe and other emerging energy hungry nations.

England&rsquo;s coal demand was up 50% in Q3 and they are only a small contributor to the $13.8 billion worth of coal that was exported in the U.S. during the first 11 months of 2012. Coal should also see a boost in countries such as Germany as nuclear-power plants are starting to be shut down. Over the next 5 years, global coal demand is expected to increase by over one billion tons.

However, the future of coal still faces a difficult road. Tougher environmental rules in the U.S., U.K. and the rest of Europe could lessen these optimistic demand projections. As the global economy improves, China and India should help pick up the slack. To put things in perspective, China consumed 3.8 billion tons in 2011 while global consumption, excluding China, reached 4.3 billion tons.

Business Solutions: Investing Ideas

Keep an eye on improving economic conditions in China to help increase coal demand and also watch the proposal in India for increased domestic production by foreign electronic manufactures. Both of these will help boost global coal demand as increased manufacturing will drive up energy demands. Europe will be a key contributor to increased exports, but regulation will complicate the matter. Coal stocks haven&rsquo;t performed at their best as of late, but a turn around could be around the corner. Below are some possible investment opportunities to help you capitalize on future coal growth:

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1. Peabody Energy Corp. ( BTU): Engages in the exploration, mining, and production of coal. Market cap at $6.37B, most recent closing price at $23.73. Investors feel their Australian mining platform is &quot; strategically positioned to benefit from this rise in Asian demand.&quot;

2. Arch Coal Inc. ( ACI): Engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States As of December 31, 2010, it operated or contracted out the operation of 23 active mines; and owned or controlled approximately 4. Market cap at $1.22B, most recent closing price at $5.75. Of Note: Net institutional sales in the current quarter at -14.3M shares, which represents about 6.78% of the company&#39;s float of 210.77M shares.